Can communicating beneficiary feedback to donors augment philanthropic gifts or improve the operations of charitable organizations? It is unclear whether an organization with a higher level of accountability is more appealing to donors than one with a lower level of accountability. From an institutional perspective, it is also unclear if greater transparency within an organization helps to increase its effectiveness in achieving its mission. By providing direct feedback from program recipients to institutions and their donors, the effects of transparency on donor participation and organization functioning will be assessed.
Context of the Evaluation:
GlobalGiving is a US-based non-profit and online marketplace that allows donors to give directly to projects in developed and developing countries through targeted online donations. GlobalGiving serves as an intermediary between donors and local partner organizations that implement and monitor projects on the ground. The idea behind this type of targeted online giving is to reduce the number of intermediaries between the donor and the recipient so as to provide a stronger and more efficient vehicle for development finance. The model also allows donors to have greater control over the types of projects their donations will support and provides information about how specific dollar amounts are used to make a difference for each program.
Description of Intervention:
IPA’s intervention targets randomly selected donors from GlobalGiving’s online platform and organizations in three countries in which GlobalGiving currently operates: Ecuador, Peru and Guatemala.
The first phase of the study measures the impact of direct SMS/text messages from beneficiaries of local organizations on the level and frequency of donations from GlobalGiving’s online supporters. Existing donors were randomly assigned to one of two treatment groups. Those in the treatment groups were presented with information regarding the new beneficiary feedback measure at the same time that they were solicited for another donation with or without specific beneficiary messages. Those in the comparison group received an email asking for another donation to a previously supported project.
New visitors to GlobalGiving’s website were also randomly assigned a treatment group, viewing project descriptions advertising feedback from clients, or a comparison group, viewing standard project descriptions. Researchers will analyze the giving behavior of individuals in treatment and comparison groups: the likelihood of an additional gift, average gift size, and whether or not donors give to additional projects.
The second phase of the study measures the impact of direct client feedback regarding the services provided by organizations on institutional behavior. Client satisfaction surveys and/or an external audit were used to measure changes in the effectiveness of the organization or any shifts in organizational behavior that result from the introduction of client feedback. In this phase, the treatment organizations received information about the client feedback program and were asked to encourage their clients to send SMS messages about services they receive. Clients were informed that that they would be reimbursed for the cost of sending the SMS message and would receive a small payment as an additional incentive. Beneficiaries of comparison group organizations were not eligible to give feedback to GlobalGiving. The goal of this phase of the project is to a) collect evidence on how organizations change their practices when feedback from donors is provided directly to donors and b) learn how providing donors with feedback affects organizations’ participation in the GlobalGiving community.
Throughout the world, charitable organizations are working to meet people’s basic needs and improve their quality of life, and these organizations often depend on the support of outside donors to finance their mission. Private donations comprised 75 percent of all charitable giving in the United States in 20081 and experts predict that the combination of increased wealth and an ageing population will lead to an even higher level of private gifts in the coming years. Such trends have left fundraisers, who typically rely on anecdotal evidence in lack of scientific evidence, divided as to the most efficient means to attract these dollars. While the economics of charity has been well studied on the “supply” side, critical gaps remain in our knowledge about the “demand” for charitable giving.
Context of the Evaluation:
In the United States, private giving to charitable causes has grown significantly in the past several decades. Recent figures show that charitable gifts of money have been 2 percent or more of GDP since 1998 and currently more than 89 percent of Americans donate to charity.
Among the tactics commonly used in fundraisers to solicit donations are matching gifts. A matching gift is a commitment by a donor to match the contributions of others at a given rate, up to the maximum amount the leadership donor is prepared to give. While the rate of matching is typically the result of an agreement between the fundraiser and the leadership donor, fundraising consultants ubiquitously note that increases in the matching ratio have power to influence contributions. Such conventional wisdom, however, is largely anecdotal as little scientific study has been completed to examine such demand side claims.
Details of the Intervention:
This study seeks to explore the importance of price on charitable giving by measuring the comparative static effects of changes in rates of matching gifts. Partnering with a liberal U.S. nonprofit organization that works on social and policy issues relating to civil liberties, this study takes advantage of a capital campaign in which prior donors received direct mail solicitations seeking contributions.
Individuals were randomly assigned to either a comparison group or a matching grant treatment group. All individuals received a letter identical in all respects except two: (1) the treatment letters included an announcement that a “concerned fellow member” will match their donation, and (2) the reply card included the details of the match. The specifics of the match offer were then randomized along three dimensions:
1. Price ratio of the match: 1:1, 2:1 or 3:1 (the 2:1 ratio means, for example, that for every dollar the individual donates, the matching donor contributes $2)
2. Maximum size of the matching gift across all donations: $25,000, $50,000, $100,000 or unstated
3. Example donation amount suggested to the donor equal to: (i) the individual’s highest previous contribution, (ii) 1.25 times the highest previous contribution, or (iii) 1.5 times the highest previous contribution
Because fundraising solicitations are sent to all 50 states, it is possible that utilitarian effects of contributing to a politically-motivated charity are different spatially due to the local political environments. To test for these effects, charitable giving data is merged with (i) demographic data, (ii) state returns from the 2004 presidential election and (iii) data on the frequency of the organization’s activities within each state.
Results and Policy Lessons:
Matching Impact: Simply announcing that match money is available considerably increases the revenue per solicitation—by 19 percent. In addition, the match offer increases the probability that an individual chooses to donate by 22 percent. This finding supports anecdotal evidence among fundraising consultants on the efficacy of a matching mechanism.
While the match treatments relative to a comparison group increase the probability of donating, contrary to conventional wisdom, larger match ratios (2:1 and 3:1) relative to smaller match ratios (1:1) have no additional impact. This result directly refutes the rationale for using larger match ratios, and stands in sharp contrast to current fundraising practices.
Heterogeneous Treatment Effects: Study findings indicate that the results of the matching gift are driven by agents in states that voted for George Bush in the 2004 presidential election: the match increases the revenue per solicitation by 55 percent in “red” states whereas there was little effect observed in “blue” states. This result suggests that an individual’s political environment also has the capacity not only to influence the level of giving, but their responsiveness to different treatments.